Start-up wants to provide free broadband

September 4, 2008

By Leslie Cauley, USA TODAY

M2Z is a small wireless start-up with a big goal: free broadband for the masses.

Milo Medin, M2Z's chairman and co-founder and a broadband pioneer, wants the ad-supported service to ultimately be available to 95% of the USA. To make that happen, the company must snag a chunk of wireless airwaves being auctioned next year by the Federal Communications Commission. If all goes according to plan, free broadband could be available as early as fall 2009.

The free service, if it launches, would run at 768 kilobits a second, 10 times faster than dial-up. Big wireless carriers currently charge a lot more — $60 to $80 a month — for a lot less, 400 to 500 kilobits or so. Premium services at higher speeds — 3 to 6 megabits initially, Medin guesses — would start at just $20 a month.

M2Z plans to have its services built into laptops, home routers and other portable devices. Medin says the company is "in discussions" with a number of major device makers but declines to say which ones. For consumers, built-in service means "instant installation," Medin says. "You'll go to Best Buy or Target, buy a (Web-enabled device), turn it on — and you're connected."

Right now, the U.S. broadband market is dominated by a handful of phone and cable TV companies. Though they compete vigorously for customers, they tend to move in lockstep on broadband, with similar monthly rates, data products and service packages.

Free broadband could seriously upset the status quo, says Blair Levin, a regulatory analyst at Stifel Nicolaus. "It would either cause the price (of broadband) to go down, or cause the current providers to really have to ramp it up" and improve their service offerings, he says.

Medin's deep-pocketed backers include venture-capital firm Kleiner Perkins Caufield & Byers in Silicon Valley. M2Z is also working with a number of partners, including networking giant Cisco.

The path to free service

M2Z's success hinges on whether it is able to buy wireless spectrum known as advanced wireless services-3, or AWS-3. The spectrum could fetch $50 million, at least. A number of companies are eyeing the block.

Wireless carriers are grousing about M2Z's plan, saying the new service could cause service disruptions for their data customers. The most vocal opponent, by far, is T-Mobile. It spent $4 billion two years ago to buy the AWS-1 block, which abuts the now-idle AWS-3 spectrum.

Medin says incumbents are just trying to throw out roadblocks. Why? Because they don't want to compete against free broadband, he says.

"If we are successful, it will force DSL and cable modem providers to work hard to give you more speed or charge less" for what they offer, he says.

Free broadband has been tried before. A few years ago, free Wi-Fi was all the rage as some communities pushed to set up systems. Today, some cities have deemed them unworkable and uneconomical. Medin says that Wi-Fi, because it is unlicensed (read: unmanaged), can be spotty. It also has range and capacity limitations. M2Z's service has none of these problems, he says.

Like Wi-Fi, M2Z's broadband services will be "portable" — but not fully mobile. That means you would be able to use M2Z services in any fixed location but not in a fast-moving car.